The head of a pharmaceutical wholesale company and others have been indicted for establishing a shell corporation and delivering large sums of illegal funds to the family of the chairman of a prominent general hospital in South Korea.
The Food and Drug Crime Investigation Division of the Seoul Western District Prosecutors' Office (Acting Chief Prosecutor Cho Manrae) announced on August 18 that it had indicted a total of eight individuals, including Chairman A of a pharmaceutical wholesale company and University Hospital Chairman B, without detention, on charges including breach of trust and acceptance of bribes, bid rigging, and violations of the Medical Service Act.
Chairman A is accused of creating a shell company from 2019 through last year, transferring shares to B and others, and then providing approximately 5 billion won in rebates under the pretext of dividends and other payments.
After transferring shares in the company to the hospital chairman's family, A paid them approximately 3.4 billion won in the name of dividends. It was also revealed that A falsely registered the chairman's family members as employees of the shell corporation to pay them salaries, and allowed them to use corporate credit cards and golf club memberships for personal purposes, thereby providing illicit benefits totaling about 1.6 billion won.
Chairman B is accused of manipulating bid results after receiving 1.25 billion won in rebates from wholesalers. During bidding processes in 2022 and this year, B allegedly received 850 million won from A and others and, together with the hospital's procurement team, prearranged bidding scenarios to ensure those companies would win the contracts.
Honorary Chairman C was found to have signed an advisory contract with the shell corporation and received 40 million won over four years, with a monthly payment of 9.67 million won, without performing any specific activities.
This case began with a tip-off regarding rebates in December 2023. Searches and seizures were conducted on the shell corporation and related entities in January and April of this year.
The prosecution stated that this investigation is significant as it is the first to uncover a new method of providing rebates using shell corporations, and it exposed bid collusion and abnormal transaction structures within university hospitals.
A prosecution official emphasized, "We will respond strictly to illegal transactions that threaten medical services and the health insurance system, and will pursue the recovery of criminal proceeds to the end."
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